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Significant developments

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Significant developments

1st May 2015

By: Terence Creamer
Creamer Media Editor

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A number of interesting developments have taken place in the electricity sector over the past few weeks that could have major long-term implications.

Undoubtedly, the highest-profile of these was the decision by Public Enterprises Minister Lynne Brown to lean on the highly regarded Brian Molefe for some much-needed leadership support at embattled power utility Eskom. The appointment is filled with irony, given that, in days gone by, it was Eskom rather than Transnet that was viewed as the better-led and -managed State-owned company. However, following a turnaround – initially led by Maria Ramos, but fiercely consolidated by Molefe – Transnet has robbed Eskom of that crown; it will be up to Siyabonga Gama to ensure that the freight-logistics group holds on to it.

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Molefe will bring not only political sway and financial-management savvy to the role, but also something of a harder edge. He will fight in his and Eskom’s corner and is likely to be more combative, including, if need be, with the regulator, nonpaying customers, as well as those whom he perceives to be unfairly criticising Eskom. It is this quality that could well endear him most to Eskom employees, who are in desperate need of a morale boost.

The second potentially game-changing development was the recent unveiling by Energy Minister Tina Joemat-Pettersson of what could be termed a ‘road map’ for the introduction of far higher levels of electricity generation by independent power producers (IPPs).

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With more than 5 000 MW already procured from renewables IPPs, Joemat-Pettersson has indicated that she will add a further 6 300 MW to the renewable-energy allocation. In addition, 2 500 MW of coal baseload capacity is to be procured, along with over 3 100 MW of gas-to-power capacity and at least 800 MW of cogeneration capacity. Should all the programmes perform as advertised, South Africa could well have added about 19 000 MW of IPP capacity by the early 2020s – a significant scale in the context of a theoretical installed base of around 44 000 MW.

In addition, the Minister has indicated that she stands ready to increase the allocation for various technologies should the current Ministerial determinations prove inadequate, particularly in the area of cogeneration.

The last, and lowest-profile, development relates to moves by the National Energy Regulator of South Africa to open the way for embedded generation, primarily grid-tied rooftop solar. The intervention is necessary, as it is already happening below the radar and, unless better managed, could have significant negative consequences for municipalities and Eskom.

But it is also extremely positive, as it allows South Africa to begin positioning itself for an inevitable change in the electricity supply industry, one where households and businesses become both producers and consumers, or so-called ‘prosumers’.

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